Oil Report

UPDATE 1-US EPA chief concerned about gas drilling fluids

* EPA hopes to launch study this year on the chemicals

* Companies say shale contains a century of US gas supply

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WASHINGTON, March 8 (Reuters) - The top U.S. environmental regulator said she was “very concerned” about fluids blamed by some for polluting water supplies near sites where drillers use them to extract natural gas from shale deposits.

U.S. Environmental Protection Agency chief Lisa Jackson said she hopes her agency will launch a study this year into the nature of fluids used in the hydraulic fracturing process of natural gas drilling.

“We are going to look at what the fluids are, what’s in them. We are very concerned about that,” she told Reuters after a speech at the National Press Club.

Exploitation of the cleaner-burning fuel could allow the United States to reduce greenhouse gas emissions and cut its dependence on coal and petroleum imports. When burned, natural gas emits only half of the carbon dioxide per unit as does coal, which generates about half of the electricity in the United States.

Critics, however, say the chemicals used in fracturing can contaminate water supplies.

Jackson said the study would examine any environmental impact from the fracturing fluids. But the study would depend on a “reprogramming” of funds because the current budget has no provision to pay for it, she added.

The EPA said last month that a budget had been proposed to allow it to conduct a “comprehensive” study of hydraulic fracturing following a request by Congress to look into the safety of chemicals used.

Hydraulic fracturing injects millions of gallons of water, sand, and a proprietary mix of chemicals up to two miles underground where it breaks open fissures in the gas-bearing shale.

Drilling companies are scrambling to develop vast shale deposits that are estimated to contain enough natural gas to meet U.S. needs for up to a century. Industry maintains its processes are safe.

Energy companies say fracking chemicals are injected into the ground thousands of feet below drinking water aquifers and that well shafts are encased in layers of steel and concrete, preventing any escape of chemicals into groundwater.

But some residents who live near gas-drilling rigs say their water has become foul-tasting, discolored or even flammable because methane from gas wells has seeped into domestic water supplies.

Industry spokespeople say there has never been a proven case of groundwater contamination from fracking. A bill in Congress would require gas companies to disclose the chemicals used in fracking and give the EPA oversight of the industry, which is now regulated by the states.

Reporting by Jon Hurdle and Timothy Gardner; Editing by David Gregorio